Small players often perform better

Nadeem Abdullah, Chief Executive of Sapphire Textile Mills Ltd, is a graduate from McGill University, Canada, and has been leading his business concern since the last 29 years. In his stewardship, the company has achieved consistent growth while maintaining the highest standards of operational efficiency. He has developed a comprehensive social charter for the organisation and is himself actively involved in social work as well.
SMALL PLAYERS OFTEN PERFORM BETTER Nadeem Abdullah oversees a textile firm of a group that is fully integrated -- from spinning up to finished goods. But as much as he believes in integration, Abdullah, whose firm often outsources its production to SMEs, is also an advocate of fostering growth in the small and medium sector.
"I think there is a need to increase coordination amongst textile manufactures...there are certain things which SMEs can manage better than bigger players, and, therefore, we need to support the textile sector SMEs," he said in an interview to BR Research.
Abdullah says that instead of expanding capacities internally, "the industry should try to collaborate with existing producers to optimise production capacities to bring efficiencies in the industry. Many existing plants may be able to add capacity with nominal investment compared to a new green field plant being set up," he said.
Similarly, he says that those plants which may be in financial crisis, may be able to collaborate with other manufacturers. . "We should only add new capacity into the industry when present capacities have been fully utilised," he added.
Contrary to the popular view that small textile players lead to low economies of scale and reduce competitiveness as a consequence, Nadeem opines that in certain industries and sectors, including textile, small players perform better than large groups. "Manufacturers that serve niche markets are also performing well; in Bangladesh and India, there are many such small size players.
Commenting on the EU trade concession, Abdullah said he is not very hopeful of the results. "First, those concessions are too limited, since the EU refused to give concessions on main exporting items especially the value added products. Secondly, if export growth on any item exceeds by 20 percent in any year, then that item will be withdrawn from the wavier list," he said, adding that giving concessions on raw materials like yarns and fabrics will hurt Pakistans local value-added industry.
Abdullah is currently bullish on cotton. "Unfortunately cotton is in short supply globally and has touched historic high prices. Pakistan is in an unfortunate position particularly due to the substantial damage due to floods; it needs to work on BT seeds if it wants to increase production of its cotton crop. This is the only way the industry can grow. Industry will only expand once raw materials are available indigenously," he said.
"This year cotton prices remained high because of shortages. If you see forward cotton prices, they are lower than the current level, which indicates that prices will ease down," he added.
Sapphire Textile exports yarns, fabrics and home textiles. whereas as a textile group, it exports nearly 75 percent of all its textile products. And aiming to expand its presence further, the companys management is currently contemplating to launch products in its own name. "We are looking on how to infuse a brand; our plan is in a concept phase," said Abdullah.
On the whole, Abdullah is hopeful of Pakistans textile industry. "Our products are making their way into the high-end fashion market. In the local market, many new, local brands are coming. It is a very good opportunity for the local textile industry".
SQUEEZING THE DAIRY INDUSTRY After successfully making its name amongst the top textile groups in Pakistan, the Sapphire group is also planning to increase its presence in the dairy sector.
"We have imported cows from Australia, because their yield is better. Right now, we are selling milk to large milk producers but in future, we will try to come up with our own brand," Abdullah told BR Research.
Sapphires dairy farm that has about 1200 animals has been set up on a model basis, and it has been replicated by several other entrepreneurs.
Abdullah said, his group is planning to go into the retail level fresh milk market. "Right now, all existing players are supplying UHT milk, which is not as healthy as compared to fresh milk. We ultimately want to grow in that (fresh and pasteurised milk) segment. We don want to compete with Nestle and Olpers; we will create our own niche," he said.
Abdullah, however, recognises that the problem with pasteurised milk is it needs a very good cold chain. "We have started test distribution, and we are still contemplating. We like to target those customers who are willing to pay a higher price to get good nutritious milk," he said.
ENERGY The group has successfully commissioned a 234 MW thermal IPP and now plans to come up with a wind power project costing about $130 million.
"We are installing 50 MW of wind energy project; we have already floated tenders and have hired foreign consultants. We are hoping to finalise tariffs by March/April," said Abdullah.
When asked if it is going to be a one-time project, Abdullah informed that they would like to make energy a field for the group. In addition to the thermal IPP and wind energy project, each of the groups unit has its own small captive plant, with only one centralised big captive plant with a capacity of 25 MW.
"We are exploring what more can be done. We want to grow in the power sector," he said adding that his group is currently contemplating whether small captive coal plants are viable or not as energy is a serious issue for industries in Pakistan.
Explaining his views on RGST and its impact on the local textile industry, Abdullah said that "without a proper export refund mechanism system, it is not feasible to implement RGST". "I personally think, given current business structure, if RGST will be implemented, people will move away from documentation and chances of corruption will increase," he added.
Interview by Ali Khizar Aslam